Planning ahead: Wills and estate planning

References

National Defence Act (NDA) - Section 42, Queen's Regulations and Orders (QR&O) Chapter 25, Defence Administrative Orders and Directives (DAOD) 7011-0, 7011-1, 7012-0, and 7012-1

Purpose

Estate planning is the whole process of arranging your personal affairs in contemplation of your death or mental/physical incapacity. Proper estate planning will ensure that your family members have less to worry about in these circumstances.

Details

A well laid-out estate plan ensures that your affairs are looked after according to your wishes and that your family is looked after. For example, you will have to consider whether you have enough money to cover expenses, such as the cost of your funeral and probate fees, should it be necessary to have your Will verified through the court system. Other expenses such as any outstanding personal loans, income tax, bills, rent or mortgage payments will also have to be paid. If you are supporting a family member, planning for the payment of these expenses as well as your family's general living expenses, such as groceries, is critical.

Proper estate planning includes preparing a will and an affidavit of execution, tax planning, completing a power of attorney (separate versions for financial affairs/property management and personal care, when you are out of country or otherwise unable to attend to your own affairs), and purchasing life insurance.

  • Your Will
    • Everyone should have a Will. Dying intestate (without a valid Will) means that you have no say in how your Estate is administered and how your assets are distributed. Therefore, if you have specific ideas regarding how you want your estate settled and to whom you want, your assets distributed, put them in writing.
    • A properly executed Will is a legal document that reflects your wishes for the distribution of your estate. While you can draft a Will on your own, you should seek legal advice from a lawyer/notary because there are certain formal legal requirements that must be followed when completing a Will. If these requirements are not followed, the Will may be invalid. A lawyer/notary who specializes in estate planning will be able to provide you with additional advice relative to your estate planning.
    • Before seeing a lawyer/notary, prepare an inventory of your assets and try to calculate their value. Make sure that you take into account any outstanding mortgage on your property.
    • Also, make a list of your Registered Retirement Savings Plans (RRSPs) and any life insurance policies you may have, and find out if you do not know whom you have designated as your beneficiary on these policies.
    • Take your time when preparing your Will. It is one of the most important documents you will sign. In addition, you should review your Will periodically as personal circumstances change. You may need to make a new Will if you experience a change in marital status or upon the birth or adoption of a child(ren). A Will made ten, five or even two years ago may not reflect your present wishes or financial situation.
    • You will need to appoint an executor and an alternate executor. The executor is the person designated by the Will to administer your estate in accordance with your Will. The executor will carry out your wishes and take care of tasks such as filing tax returns, protecting your property and paying expenses. You should discuss with your lawyer/notary who should be your executor and how much he/she will be paid for carrying out that duty. Some people choose an individual such as a spouse, other family members or a close friend. Other people choose a trust company because they have expertise and are impartial when carrying out duties of an executor, which may minimize taxes.
  • Living Will  The expression living will is sometimes used to refer to a document in which you stipulate your desire about treatments if you become ill or injured and can't communicate your wishes. It is quite common, for instance, to write a living will saying that you do not want to be kept alive on artificial life supports if there is no hope of recovery. The term advance directive is also frequently used to refer to such a document. The expression proxy directive is also utilized to describe a document that combines a Power of Attorney and a living will.
  • Tax planning  Tax planning is an important part of estate planning. There are several ways to reduce estate taxes, such as charitable donations or RRSPs to spouses or dependent children. It is a complex area, so discuss it with your financial advisor, lawyer/notary or accountant.
  • Powers of attorney  Besides your Will, you should discuss preparing a power of attorney with your lawyer/notary. This is a legal document, which you sign, and have witnessed; authorizing a person or persons to make decisions for you should you ever become incapable of making these decisions for yourself. There are two kinds of powers of attorney: one for managing financial affairs or property, and another for personal care. The latter type allows you to organize your affairs so that someone you trust will have authority to decide about your health care, nutrition, shelter, clothing, hygiene and safety if you cannot.
  • Life insurance –
    • Amongst other things, life insurance can help provide your family with replacement income after your death, as well as cover your final expenses and debts you may have. Unlike the proceeds of your RRIF, which are transferred to your estate and taxed, the proceeds of your life insurance policy are tax-free. To be insurable, however, you must be healthy. Keep in mind that your premiums will vary depending on such factors as your health, age and coverage amount.
    • There are different types of life insurance, including term insurance, permanent insurance and universal life. Consult a financial advisor for more information and to help you do a need analysis. It is a good idea to comparison-shop and find the product that best suits your needs and your budget.
  • Tips
    • Make sure that your financial affairs are in order and your records are up-to-date at all times;
    • Make sure your executor knows where to find your records;
    • Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) pays out a lump sum death benefit to your surviving spouse or estate; and
    • There are several ways you can minimize your estate costs, such as establishing a spousal trust and designating beneficiaries on your RRSPs, Registered Retirement Income Funds (RRIFs) and life insurance policies. Consult a financial advisor to help you consider what is right for you.
  • The Canadian Forces (CF) Service Will  The CAF strongly urges every member to make a Will on enrolment and, review, update their Will upon the birth or adoption of a child(ren) and to make a new Will upon any change in marital status (see DAOD 7012-0). However, a Will (referred to as the service will) may be made at any time during service and placed in safekeeping with the CAF or elsewhere. The CAF provides a simple Will Form, which is a very basic Will, appropriate primarily for single CAF members. A lawyer/notary may be consulted to make a Will with specific provisions, including but not limited to trusts and guardianship for children and additional bequeaths. A private Will may be deposited with the CAF for safekeeping.
  • Note the following reminders:
    • Ratify or replace any Will made before reaching the age of majority (this age varies between provinces and territories);
    • Update a Will upon the birth or adoption of a child(ren);
    • Make a new Will upon marrying, unless the existing Will was made in contemplation of the marriage and states this clearly; and
    • Make a new Will upon divorce.
    • If a Will has been deposited with the CAF for safekeeping, the member is entitled to receive it or to have it forwarded to his/her address upon release. It is important to complete any necessary documentation in this regard.
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